Risk taking strongly influenced by sense of control, says UGA researcher
A sense of control is a key factor in determining whether people take risks or avoid them, says Adam Goodie, a University of Georgia assistant professor of psychology. In a series of experiments, he found that participants were more willing to take risks when they felt they could control the outcome of a situation - even if they overestimated their likelihood of success. Goodie presented the research Monday at the annual meeting of the Society for Judgment and Decision Making, held in Orlando.
"People are really willing to take risks when they're highly confident in their own knowledge, even though it's a bad idea," says Goodie.
Goodie's experiments build on a body of research indicating that people are often overconfident about their knowledge. He asked participants to answer trivia questions and rate their level of confidence for each answer. Participants often specified a higher rate of confidence than was warranted; when they estimated a 99 percent rate of confidence, their rate of answering correctly was about 95 percent.
Goodie added a new element to the research: he used a point system to offer participants bets based on their confidence level. With a high confidence level, participants were offered a bet that gave a small reward (100 points) for each correct answer but a large penalty (9,900 points) for each incorrect answer. With a low confidence level, participants were offered what Goodie calls "a more gentle bet": a small reward (100 points) for each correct answer and a slightly larger penalty (104 points) for each incorrect answer.
Over the long run, the riskier payoffs when confidence is high make them a worse bet than the more gentle bets when confidence is low. Despite the odds, Goodie found that participants were far more willing to risk a large penalty by betting when they rated their confidence high. They were less willing to bet when their confidence was low, even though the prospects for winning over the long run were better.These results conflict with earlier findings that indicated people rejected the odds of the high confidence bet when it was based on a random event - the flipping of a coin, for example.
"When people are called to gamble on a random event, where there's a very large probability of something small but good happening and a very low probability of something big and bad happening, they don't want to do it," Goodie says. "If it's something they have control over, like their own knowledge of the world, then they insist on doing it. That has significance for all sorts of decisions we make in our lives."
The most obvious example is the debate over airline travel since the events of Sept. 11, Goodie says.
"People aren't afraid of driving, but they're afraid of flying even though air travel is statistically much safer per mile traveled," he says. "But people feel safer if they're driving because they have control over the sources of risk and uncertainty."